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INTERNATIONAL

JOURNAL OF
International Journal of Business, Management and Social Sciences BUSINESS,
MultiCraft Vol. 1, No. 1, 2010, pp. 59-64 MANAGEMENT AND
SOCIAL SCIENCES
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2010 MultiCraft Limited. All rights reserved

A SWOT analysis of small and medium scale enterprises implementing total


quality management

S. D. Kalpande1*, R. C. Gupta2, M.D. Dandekar3


1*
Department of Mechanical Engineering, METs Institute of Engineering, BKC, Nashik, Pune University, Pune, 422003, INDIA
2
Department of Industrial and Production Engineering, Shri G. S. Institute of Technology & Science, Indore M.P., 452003, INDIA
3
Department of Industrial and Production Engineering, Shri G. S. Institute of Technology & Science, Indore M.P., 452003, INDIA
*
Corresponding Author: e-mail: shyamkalpande@gmail.com, Tel +91-9209293782

Abstract

Small and Medium scale Enterprises (SMEs) playing a vital role in nations economy. Many studies have demonstrated the
positive impact of Total Quality Management (TQM) practices on Small and Medium scale enterprises. These have relied on
managers self assessment of performance in reaching the objectives of study. It is also observed that many SMEs are ineffective
and some are closed down. The main problem of those SMEs seems to be the low quality of their product and rise in competition
in the market. To stand in the market, it is necessary for SMEs to face new challenges by adopting proper strategy. SWOT
(Strength, Opportunity, Weakness, and Threats) analysis is one of the techniques to undertake a more structural analysis to
formulate the best strategy. SWOT is the combination of four major terms as Strength, Opportunity, Weakness and Threats. The
study shows that Competition and Rise in expectation of Customers are the major external issues for the SMEs of this
region. The main threats observed are competition from large & multinational businesses, financial stringency and technological
obsolescence. The aim of SWOT analysis is to identify the extent to which the current strategy of an organization and its more
specify strength and weakness are relevant to, and capable of dealing with the changes taking place in the business environment.
Every unit must be aware of their Strength, Opportunity, Weakness and Threats. To succeed in any field, weakness must be
overcome through strength and threats must be transferred into opportunities.

Keywords: SMEs, TQM, SWOT Analysis, Structural Analysis.

1. Introduction

Total Quality Management also known as TQM, is a continuous effort to improve quality and achieve customer satisfaction. It is
primarily an organizational strategy considered as a change program to achieve excellence by producing quality service as defined
by the customer (Garg, 2008). On the study of TQM effect on organizational performance, most research has focused on analyzing
the relationship between the implementation of different and several types of performance (Poonsook et al., 2005). The causal
analysis result shows that dynamism, munificence and complexity influence the degree of implementation of the main TQM
principles. The most relevant effects emerge as a result of the environmental dynamism, and the least effects are due to
munificence. Similarly, the dimensions of TQM have an impact on different types of performance. The model can be used by
organizations to assess their level of TQM success depending on specific environmental characteristic.
Study report shows that there is a growing number of SMEs in India yearly. In spite of this, it is also observed that many SMEs
are ineffective and some are closed down. The main problem of those SMEs seems to be the low quality of their product and rise
in competition in the market. Ineffectiveness may result in the locking up of resources, wastage of capital assets, loss of production
and increasing unemployment. In addition the ineffective units are mainly affected by the reduction of loan-able funds by financial
institutions. This results in reduction of the velocity of their circulation. The investigation suggests that quality management in
manufacturing companies should be conducted in a cost-effective way and directed towards improving the operational efficiency
and effectiveness of the entire organization rather than simply satisfying the customers (Yeung and Chan., 2005). To stand in the
60 Kalpande et al. / International Journal of Business, Management and Social Sciences, Vol. 1, No. 1, 2010, pp. 59-64

market, it is necessary for SMEs to face new challenges by adopting proper strategy. SWOT (Strength, Opportunity, Weakness,
and Threats) analysis is one of the techniques to undertake a more structural analysis to formulate the best strategy.
On this background the objectives of this paper are to-
o Study SMEs and
o Apply SWOT analysis for the situational analysis of SMEs to get insights into their status.

1.1 Introduction to SWOT Analysis: SWOT is the combination of four major terms as Strength, Opportunity, Weakness and
Threats. Strength refers to inherent abilities to complete and grow strong. Weaknesses are the inherent deficiencies that cripple
ones growth and survival. Strength and weakness are mostly internal. Opportunities are the good chances and openings available
for growth. These are environmental & external. Threats are extremely wielded challenges, which might suppress inherent
Strength, accelerate weakness and stifle with opportunities being exploited. These are again posed due to the external environment
(Foong, 2007; Directors Briefing, 2006).
According to Johnson and Scholes (1994) the aim of SWOT analysis is to identify the extent to which the current strategy of an
organization and its more specify strength and weakness are relevant to, and capable of dealing with the change taking place in the
business environment.
Every unit must be aware of their Strength, Opportunity, Weakness and Threats. To succeed in any field, weakness must be
overcome through strength and threats must be transferred into opportunities.

1.2 Benefits of Small and Medium Enterprises: SMEs provide development sinews to the hook and corner of the economy.
Economic growth is accelerated by the SMEs, as SMEs are productive and vibrant contributors to the economy. SMEs output grew
with higher speed than the large industrial sector. Employment generation in SMEs is swifter, 0.5 million jobs annually. SMEs is
33% more employment intensive than the whole of the economy taken together. Exports of SMEs are surging fast and its share is
over 42%. Besides these the capital intensity is less. Investment in fixed asset in SMEs is just one fourth of that of large-scale
industries. On the other side the labour absorbing capacity of large scale industries is limited and has been declining over a period
of time due to the fact that it becoming more capital intensive. Similarly, growth in agriculture facilitated by irrigation was labour
intensive in the initial stage but become capital intensive later and was accompanied by reduced labour absorption. Moreover, the
pressure of population on land is already high and increasing and has resulted in a large surplus of labour in rural areas. On this
background, it is felt that SMEs represents a vital backbone of the Indian economy.
There is also a growing worldwide appreciation of the fact that the small and medium enterprise plays a catalytic role in
development process of most of the economies. This position gets reflected in the form of increasing number, rising proportion in
overall product manufacturing, export and manpower employment by these units (SIDO GOI., 2004 and Economic Survey, GOI.,
2007). This makes them the backbone of industrial economy in a developing nation like India.
Throughout the world economics are to a large extent dependent on the success of SMEs. For example, in the UK alone more
than 70% of all business employs fewer than hundred people (Huxtable, 1995). Also 18% of UK gross output (Manufacturing) is
generated by SMEs (Ghobadian and Gallear, 1996). In Japan 72% of the entire workforce is engaged in SMEs, whereas in USA
and Korea 53% and 51% respectively. In India SMEs account for about 40 % of the total industrial output and contributes nearly
35% of the total direct exports. Table 1 shows the contribution of small sector industries worldwide. Small and medium enterprises
(SMEs) comprise 95% of Australian businesses, employ 45% of the workforce, and generate 55% of sales. With significant
downsizing of large enterprises over recent years, there has been an increasing interest from both governments and industry bodies
in Australia in the growth potential of this sector. It is recognized that there are political, economic and social imperatives for
helping SMEs to survive and develop, particularly to support job growth (Barnes et al., 1998).

Table 1. Contributions of SSI Worldwide


Country Share of Total Criteria for Recognition
Output Employment Export
India 40% 45% 35% Fixed assets
USA -- 53% -- Employment
Japan 52% 72% 13% Employment & assets
Taiwan 81% 79% 48% Paid up capital, assets and sales
Singapore 32% 58% 16% Fixed assets and employment
Korea 33% 51% 40% Employment
Malaysia 13% 17% 15% Shareholder fund & employment
Indonesia 36% 45% 11% Employment
Source: Laghu-Udyog, Volume, 26 (6), 2008
61 Kalpande et al. / International Journal of Business, Management and Social Sciences, Vol. 1, No. 1, 2010, pp. 59-64

2. Methodology

A structured questionnaire survey and open-ended interviews are used as a technique for data collection. Literature review and
discussion with managers from SMEs were used for developing the questionnaire. The questionnaire was divided into three
sections-
1. The company background i.e. Year of Establishment, No. of Total Employees, Main Products, Total annual Production in
Rupees, Total investment in Land and machineries in Rupees and Turnover of last three years etc.
2. SWOT factors i.e. Questions on the various factors considered under strength, Weakness, Opportunities and Threats are
shown in Table 2.
3. Environmental factors, i.e questions on the various external factors affecting the performance of the plant are shown in
Table 2.
The structured questionnaires consist of five questions. For identifying the rank of various factors considered under Strength,
Opportunity, Weakness, Threats and Environment and data is collected from the target market. Likert type five point scales were
used. In which, 1- indicates most favorable response and 5- indicates least favorable response. The sum of the responses for each
factor was calculated. The factor having lowest sum has been given first rank, and the factor having highest sum was ranked as
last.

3. Data Analysis

3.1 SWOT Analysis: There are three major aspects of TQM and it is only when all three are employed together that have a
complete TQM effort. These components are: the cultural aspect, the technical aspect, and the managerial aspect (Jack, 2007). The
major strength, weaknesses, opportunities & immediate threats to SMEs are:-

Table 2. Factors considered for SWOT Analysis


S1 Flexibility W1 Lack of Quality Consciousness
S2 Owners Management W2 Under utilization of capacity
S3 In-expensive labour W3 Lack of Financial strength
S4 Less overheads W4 High percentage of absenteeism
Strengths
S5 Favorable capital output ratio W5 Lack of proper work culture
S6 Flat management structure W6 Lack of trained workers
S7 Co-operation from the employees W7 Lack of technology superiority
Weaknesses
S8 Closeness to market W8 Lack proper management orientation
O1 Expert Market W9 High turnover of key personnel
O2 Govt. Support W10 Lack of planning
O3 Excise Relief W11 Lack of long-term strategic focus
Opportunities
O4 Increase of ceiling for SMEs W12 Lack of infrastructure facilities
O5 Ancillarisation to large business W13 Inadequate attention to research
O6 Reservation of product items by Govt. and development
E1 Competition from large & Multinationals T1 Competition from large
E2 Rise in expectation of customer and Multinationals
E3 Govt. Support (Financial/non financial) T2 Financial stringency
E4 Export Market T3 Technological obsolesces
Environmental E5 Increase in price in input Threats T4 Negligence towards industrial
training
E6 Shortage of raw material T5 Increase in the price of inputs
E7 Ancillarisation to large Industry T6 Lack of political peace and Stability
E8 Political will and stability.

4. Situational Analysis of SMEs

The SWOT analysis, a powerful tool develop by the above procedure, was used for the situational analysis of SMEs. The
statement was examined one against another on the lines suggested by Johnson and Scholes (1994). The analysis of the outcomes
would basically be gap analysis; i.e. comparing the actual situation with the planning standards or other norms. Analysis of the
time series would show whether the situation is improving or deteriorating (IFUW, 2007).The analysis is shown in Table 3. The
main strength and weakness are in the left hand column, and are examined in terms of the key environmental issues: a + or - or
0was scored as follows:-
Marking + if there was a benefit to SMEs, i.e. if:
62 Kalpande et al. / International Journal of Business, Management and Social Sciences, Vol. 1, No. 1, 2010, pp. 59-64

o A strength enabled to take advantage of or counteract a problem arising from a environmental change;
o A weakness was likely to be offset by the change.
Marking - if there was an adverse effect on SMEs, i.e. if: -
o A strength was likely to be reduced by the change;
o A weakness prevented the organization from overcoming the problems associated with the change or was accentuated by
that change.
Marking 0 if there was no effect on SMEs.

Table 3. Approaches used for Managing Quality- Selection Grid


Competition Govt. Support Rise in Shortage Export Increase Total
from large & (Financial/non expectation of raw Market in price
Multinationals financial) of customer material in inputs
Strengths 0 + -

Flexibility + + + + + + - 6 -
Owners + + + - 6 -
+ + +
Management
In-expensive 0 + 0 2 4 -
+ + +
labour
Less overheads + 0 + 0 + + 2 4 -
Favorable capital 0 0 0 0 0 5 1 -
+
output ratio
Weaknesses
Lack of Quality + - 0 - 0 2 1 3
-
Consciousness
Under utilization + 0 - - 0 2 1 3
-
of capacity
Lack of Financial + - 0 - - 1 1 4
-
strength
High percentage 0 - 0 - 0 3 - 3
-
of absenteeism
Lack of work 0 - 0 - 0 3 - 3
-
culture
Lack of trained + - 0 - 0 2 1 3
-
worker
Lack of tech. + - 0 - 0 2 1 3
-
superiority
0 1 5 2 9 - 7
+ 4 7 4 2 5 4
- 7 - 6 1 7 1

What this analysis yield is a much clearer view of the extent to which the environmental changes and influences provide
opportunities or threats, given current strategies and organizational capabilities. Table 3 shows that a major opportunities lies in the
utilization of financial & non-financial support extended by Govt. and gain vast export market. Owner management & flexibility
are the some other areas, which provide opportunities for growth. Likewise, the major threats include competition from large and
multinational and rise in expectation of customers. In the light of the above considerations, the need for quality initiatives in SMEs
was felt.

5. Discussion

The study shows that Competition and Rise in expectation of Customers are the major external issues for the SMEs of this
region. The main threats observed are competition from large & multinational businesses, financial stringency and technological
obsolescence. Only 16 % of the SMEs from the sample used ISO certification as an approach for managing quality. Table 4 shows
that TQM approach is not used at all. Very few SMEs identified the importance of TQM & planning for TQM adoption. Lack of
quality consciousness, under utilization of capacity, lack of financial strength, non availability of trained workers, lack of culture
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due to low industrial development and high interest on loan are the some of the common problem faced by SMEs. So the thrust
areas for SMEs of this region are-
i. Education and training to manager/ entrepreneur regarding the benefits and need of continuous improvement.
ii. Education & training to employees on various aspects like quality and its need, use of SQC, importance of continuous
improvement, use of data and understanding of processes.
iii. Adoption of philosophy of continuous improvement (TQM) and
iv. Development of competitiveness through use of better technology, use of improved equipment and testing facilities.

Table 4. Approaches used for Managing Quality


S.N. Name of Approaches No. of Units
1. Traditional Approach (Inspection) 65%
2. ISO Certification 16%
3. Statistical Quality Control (SQC) 13%
4. Total Quality Control (TQC) 02%
5. Others (TCCQS) 03%
6. Total Quality Management (TQM) 01%

6. Conclusion

SMEs play an essential role in sustaining a developing nations survival and growth. The aim of this study was to investigate
the extent to which the SWOT factors have been attained in SMEs with particular reference to the selected companies operating in
Maharashtra. The empirical data was collected and practitioners opinions were analyzed to compare the actual situation with the
planning standards or other norms. The study shows that Competition and Rise in expectation of Customers are the major
external issues for the SMEs of this region. The main threats observed are competition from large & multinational businesses,
financial stringency and technological obsolescence. It was found from the SWOT analysis that poor information on TQM, low
level of awareness and understanding, and non availability of a specially developed TQM model which guides the TQM
implementation are found to be the main barriers in the process of adoption of TQM philosophy in SMEs and potential benefits
could be derived from the successful implementation of the TQM. In spite of the various lacunas, it is felt that with the existing
technology and manpower, SMEs can do miracle by adopting a philosophy of continuous improvement (TQM). It is imperative to
pay attention towards the study of existing self assessment and quality awards models which suit the needs of SMEs as a future
scope.

References

Barnes M., Coulton L., Dickinson T., Dransfield S., Field J., Fisher N., Saunders I. and Shaw D., 1998. A New Approach To
Performance Measurement For Small And Medium Enterprises, Proceeding of International Conference on Performance
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Directors Briefing, 2006. SWOT Analysis, e-book Online Published by BHP information solution Ltd., Althorp House, 4-6 Foong
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http://tqmcasestudies.com/tqm-case-studies-directory.html
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Huxtable, N 1995, TQM; Small business, Chapman and Hall, Landon.
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Management Systems, Proceeding of the Fourth International Conference on Business, Bangkok, Thailand.
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Biographical notes

S. D. Kalpande is a Workshop Superintendent and Head of Mechanical Engineering Department, METs Institute of Engineering, Bhujbal Knowledge City,
Nashik, Maharashtra, India. He has 15 years of experience in teaching and research. He is a Life Member of IIIE (India), Life Member of ISTE (India).

R. C. Gupta is a Professor and Head of Industrial and Production Engineering Department, Shri G.S.I.T.S, Indore, M.P., India. He has more than 25 years of
experience in teaching and research. His research interests include industrial engineering, total quality management, supply chain management, world class
64 Kalpande et al. / International Journal of Business, Management and Social Sciences, Vol. 1, No. 1, 2010, pp. 59-64

manufacturing and Multi-criteria Decision-Making. He has written two books on relevant subjects. He is a Life Member of IIIE (India), Life Member of ISTE
(India).

M. D. Dandekar is a Associate Professor in the Industrial and Production Engineering Department, Shri G.S.I.T.S, Indore, M.P., India. He has more than 20 years
of experience in teaching, research and industry. His current area of research includes manufacturing processes, tool design, quality engineering, supply chain
management, Intellectual Property Rights and world class manufacturing. He has published and presented various papers on his research in international journals
and national and international conferences. He is a Life Member of IIIE (India).

Received June 2010


Accepted September 2010
Final acceptance in revised form September 2010